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It appears this Administration took your advice in regards to the federal budget being in chronic deficit and I'm looking forward to hearing your follow up on how the proposed bugdet will affect government savings.

Professor Sachs seems also to be mired in ECON. 101 because he sees FRICTION-LESS SHIFTING of resources to alternative uses.This is utter nonsense. As well, he ignores other clear identities, e.g., if mean real income has been unchanged - and some people have gotten income increases substantially above the mean, then others have had their real incomes fall: total gains are identical to total losses. That is why savings are low and falling: most Americans don't have Sachs' income; they have to borrow to make ends meet, so how are they expected to save?

Perhaps Sachs should be given another endowed academic appointment - Processor of Economic BS. Alternatively, let's see how these tenured apologizers for Board Room Republicans and Wall Street Democrats fare if they had to find new employment outside academics without facing high transactions costs.

Is Project Syndicate just another vehicle for Establishment "Thinking?" Can the editors isolate "opinion" from "analysis" and clearly indicate the difference at the top of the article?

I would point to the overvalued US dollar as a result of reserve currency status as the main cause of the trade deficit. This allows American companies to arbitrage through imports. Meanwhile the expansion of government spending underwrites the structural disenfranchisement of the American worker. This game is sustainable on condition of exceptional American institutions, innovation and political leadership, without which the excess of deficits will tend to create serious problems.

It's absolutely correct to criticise those I power who are economically illiterate.

But there's a problem: economists refer to their discipline as "the dismal science". It's a well known aphorism that if you put ten economists in a room, you'll get at least a dozen different forecasts.

But there's an even bigger problem still: economists as a whole failed to forecast the Global Financial crisis that started in 2007 and still haven't fixed it.

Now let's not go all pPopulist and say that just because economists do make good forecasts, the discipline e is useless. History shows us that populists ruin economies once in power - mostly through ignorance or economics.

So what's the solution? How can economists make useful contributions when their discipline is in such trouble?

It's not such a problem with the discipline. Many economists foresaw the 2007 collapse, though few dated it correctly. The problem is that policymakers emphasize dogma over Keynesian reality; their advisers are more often than not speculators rather than trained economists. The problem, in my view, with the public's view of economics is that most people think any businessman (Trump, for example) has the same economic understanding as someone with an actual degree in the field.

Professor Sachs's analysis is correct. The simplest way to see the analysis is to apply it to yourself. If your consumption exceeds your income, you must be borrowing from someone else (your import exceeds your export.) If your consumption is less than your income, you must be lending to someone else (your export exceeds import): we know (assume) you are intelligent enough not to put the excess under your pillow! Why is this so hard to apply to the country as the unit of analysis?

az, Alas your model falls rather short. Say I work 8 hours a day, and spend 4 hours per day idle, while eating all of my meals in restaurants. At some point I reform and impose a "tariff" on restaurants. Now I cook my own meals using 2 (otherwise) idle hours. My income from working doesn't change, but my "imports" crash. My Saving (S) minus Investment (I) balance immediately changes because my Exports (E) stay the same while my Imports (I) crash. In other words, E-I drives S-I and not the other way around. The obvious question is whether the U.S. has idle resources. Yes, the U.S. has 10 of millions of unemployed and underemployed people.

Readers might greatly benefit if Professor Sachs could kindly read and respond to the counter-argument from Jared Bernstein and Dean Baker on this topic: https://www.theatlantic.com/business/archive/2016/12/trump-trade-deficit/509912/

Dear Jeffrey, Economic ignorance is rife everywhere in modern economics. You have your share of howlers. Federal governments don't need or have "revenue" The usual suspects called revenue, taxation, is money "destroyed" after taken out of circulation as tax. Governments [Federal ones} have no need to borrow of save. If they do it's purely a voluntary action.

The impose tax barries to import goods means to increase the domestic spending for the same goods and diminishing global savings. So even if exports output does not decline, the saving rate falls in order to support un competitive local output. To neutralize this effect Trump proposal to reduce Government spending goes in the right direction. The main question is how to cut this spending without affecting productivity. But if Trump wants to increase military spending, then he confronts the have a cake and eat it dilema. If you add to that his wish to lower taxes he wi'll end up in a real trouble, with higher fiscal deficits as well as current account deficits.

This article includes hidden assumptions and bad logic that lead to questionable conclusions. The author points fingers as others for their “economic illiteracy” and “embrace of economic ignorance,” but would do well to reexamine his own flawed thinking. His examples and embedded logic appear to be based on an unstated assumption that the world and US economies are supply constrained as opposed to demand constrained. For example he implicitly assumes the US cannot increase total production in response to a reduction of imports in the following:
“Suppose …. the US imposes new import barriers in response to its current-account deficit. These import barriers would pull workers and capital into import-competing sectors and away from export sectors, roughly leaving the US trade balance unchanged while lowering national income and average living standards.”
But, what if the capital and most of the workers drawn into import-competing sectors do not come from export sectors but instead represent underutilized resources that are put to work, resulting in an increase in total production? With this assumption the US trade balance is reduced, national income is increased and GDP per capita/average living standards are increased. Said another way, the increase in production in the import-competing sectors far exceeds any loss in production in export sectors. A related effect is that the increased economic activity will increase government tax receipts thereby tending to reduce the budget deficit.
The Trump camp believes that the US has underutilized resources and can significantly increase total US production in response increased demand resulting from reduced imports and/or increased exports, which stands in stark contrast to the authors implicit assumption that this is a zero sum game where any increased production in one sector must be met with decreased production in another sector. While I disagree with Trump on many things, on this topic I strongly agree with Trump. The US can significantly increase total production, and US business would respond to make it happen if profitable demand for US made products materializes. There is some existing underutilized capacity that could increase production fairly quickly when demand improves; however, to bring overall trade into balance would require some time and investments to increase capacity of existing factories, construct new factories, and train workers.
The suggestion by the author in the quote above that capital required for the import-competing sector would need to be taken from the export sector seems completely detached from reality. Clearly, there is no shortage of capital in the US. US corporations are carrying lots of cash on their balance sheets and have been buying back stock because they are not finding enough profitable investment opportunities. Similarly, borrowing costs are very low and investors are desperately seeking investments with reasonable risk adjusted returns. Rather than a capital shortage there is a worldwide surplus of savings seeking a place to invest.

An accounting identity is indifferent to cause and effect. X-M and S-I will do what they are going to do because of real causes and rel effects in the real economy.

This statement can be found only in an economics class: "The size of the import-competing sectors will then shrink, freeing up workers and capital to increase output in export sectors." In the real world, that capital went to China, and those workers voted for Trump.

In the real world, economists in the mercantilist country smile and thank their lucky stars that they did not take economics degrees in the US.

"This statement can be found only in an economics class: "The size of the import-competing sectors will then shrink, freeing up workers and capital to increase output in export sectors." In the real world, that capital went to China, and those workers voted for Trump."

Higher prices on import goods is a fair cost for retaining and seeing jobs return to America. Several economists have come out recently pointing out that the first thing to suffer from Trump's economic policy will be low prices at Walmart.

The truth is we should call a spade a spade and question how much we really gain when we find Americans can no longer get good paying jobs because they have been exchanged to other countries in order to lower the price of goods we buy. The article below explores how this is akin to a deal with the devil and over time it has hollowed out our middle class.

While history is important to remember it does not define the future. While pondering the current economy that is becoming more of a conundrum every day. The global economy is like a Rube Goldberg machine, contraptions built in a ridiculously complicated way to perform what would normally be a simple task.

Unfortunately, nothing is simple when it comes to economics and it is best not to have a great deal of faith in our economic system because it is severely flawed. Central banks can stack the deck but when it gets too high and begins to fall they may not be able to control the direction or who it will crush. More on this subject in the article below.

But if US is 'spending more than it is earning'(i.e. low and falling savings rate) as stated here the result would depend on what it is buying, goldfish bowls or productive capital? If it is 'borrowing' for expanding investement (infra structure, wall-building etc.) we might expect economic growth financed by other people's savings.Mercantile check on dollar outflows that would otherwise be misdirected for cheap-labour imports and substitutes for local crafts,and which also undermine local high-tech production, could then be diected to limit the threatened domestic collapse, surely. Like the mercantilism that promoted growth and industrialisation in Britain and then Europe.
Also this article (like most) seems to skate round the USD role as an iternational reserve currency. My underestanding is that in banking terms dollars never leave the US; they are switched between mirror accounts to record overseas payments made between foreign traders trading off-shore among themselves. Perhaps this costless growth of dollar balances (Q-easing etc.) has no simple relation to US savings, and can also allow US to import (hopefully) capital goods) at no real cost? I only ask because it would be nice to know.

Trump does not have many economics freshmen among his supporters. They come at it from a different angle: "When I go to Walmart everything is stamped MADE IN CHINA - case closed".

What they don't see is that many/most of these things are designed and owned by American firms outsourcing production there. When production is outsourced, the general trend is that the majority of profits are reaped by the IP owner and the minority by the producer.

The problem in any politics (or economic or scientific field) is that when the truth goes against a generally held view based on common sense it is often the later that wins out, even more so when the truth is complicated or technical.

Coming up with policies to help Americans isn’t that hard. It’s really quite easy. Coming up with policies to help Americans that don’t offend cosmopolitan elites is impossible. That’s the real issue.

Trade policy is a good place to start. Fiddling with tariffs might not bring to many jobs back. However, Warren Buffet’s plan would be a huge plus. See

“America’s Growing Trade Deficit Is Selling The Nation Out From Under Us. Here’s A Way To Fix The Problem–And We Need To Do It Now.”

So would Grove’s. See

“Andy Grove: How America Can Create Jobs”

Grove died this year. One of the commentaries on his death, extensively noted his commitment to prosperity in America. See

“Andy Grove’s Warning to Silicon Valley”

“Mr. Grove acknowledged that it was cheaper and thus more profitable for companies to hire workers and build factories in Asia than in the United States. But in his view, those lower Asian costs masked the high price of offshoring as measured by lost jobs and lost expertise. Silicon Valley misjudged the severity of those losses, he wrote, because of a “misplaced faith in the power of start-ups to create U.S. jobs.”

Mr. Grove contrasted the start-up phase of a business, when uses for new technologies are identified, with the scale-up phase, when technology goes from prototype to mass production. Both are important. But only scale-up is an engine for job growth — and scale-up, in general, no longer occurs in the United States. “Without scaling,” he wrote, “we don’t just lose jobs — we lose our hold on new technologies” and “ultimately damage our capacity to innovate.””

Another obvious issue is immigration. If America is really doomed to loose less-skilled jobs by the millions, how does it many any sense for the U.S. to encourage low-skill immigration into the U.S.? Let me use construction as an example. Construction was a typical non-college jobs for Americans for decades. Now it is not. Vast numbers of Americans have been pushed out of the construction labor force and into the netherworld of “disability” and opioid addiction. How does this make sense?

@Peter and Steve - you are both right - the full picture is way more complicated and nuanced than I am making out - but many Trump supporters no doubt see the whole thing simplistically. I do also agree that America needs to return to a state where (say) half of consumer goods are manufactured there. I can think of a few ways to do this but every one has a cost and risks associated with it.

MP, There are two major problems with your analysis. First, you are probably wrong. See "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive" (NBER). The abstract reads

"The rise of China in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of domestic value added (DVA) in exports, but the computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By our estimation, the share of domestic content in exports by the PRC was about 50% before China's WTO membership, and has risen to over 60% since then. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly low domestic content (about 30% or less). "

In other words, China is generating and keeping a much higher fraction of its export revenues than is commonly believed. However, the second point is also important.

Even when some of the cash flow goes to IP owners, workers don't benefit. IP payments may be great for corporate bonuses. They don't add to the payrolls of working class and middle class voters. Do they increase inequality and support the elite cosmopolitan class? Sure they do which account for their enormous popularity with the PS folks.

You are correct up to a point, you have to ask is your model is the start or earlier section of the process not the end point

The problem is that the outsourced activity rapidly becomes the base for accelerated know-how acquisition. So for example Warren Buffet ends up buying into Chinese battery tech and patents which is implemented in virtually all mobile phones

Then there is the uptick of education. 2012 OECD report - China and India to produce 40% of global graduates by 2020
http://monitor.icef.com/2012/07/china-and-india-to-produce-40-of-global-graduates-by-2020/

In the UK there are almost as many Chinese students as British students.

The combination of native know how, cheap labour and a link into the crest of the wave tech is formidable and is also aided by a lack of Health and Safety requirements etc etc etc.

Off-shoring is a way of ducking bio risks and bypassing environmental issues. Thus for example US corps have hopped over the border to set up Mexican based factory farms which are little mote than bacterial incubation pens which have on more than one occasion resulted in entire facilities having to be shut down with contents culled as cross species disease was rampant

Profits may be reaped by IP holders but jobs are reduced and considerable effort put into manipulating multinational tax programs in tax avoidance

What results then in the West is typified by Le Pen campaigning in France that cheap goods are being imported for the freshly unemployed to buy made by slaves in the Far East which is quite attractive to the French dispossessed in this process. Paralleled by the- I would rather be a poor master than rich servant approach develops

Economics and Capitalism both fail when they fail to deliver stable society

Trump may be wrong in his solution but he knows the problem which almost all politicians have religiously attempted to avoid as an issue

US trade deficit means US prosperity is financed by foreign countries.
Hoping that the US dollar is in a sustainable uptrend and that there is still plenty of time to pass the bags on to the last unsuspecting holders is a fool's errand at this point in the monetary system's cycle.
People may consider extremely useful studying in advance and readying themselves mentally for what happens next when the reserve currency status is lost.

THE PUNDITS INFALLIBILITY
Despite the enlightenment of Economic Pundits that seemingly prevailed until Trump, Trump happened.
Despite the enlightenment of Economic Pundits that voiced their wisdom n opposition to Brexit, Brexit happened.
Despite the enlightenment of Economic Pundits that have opposed BJP Cowboys apparent non secular fitness to rule, Modi happened.
Despite the enlightenment of Economic Pundits in Europe opposed to Marine LePen alt.right credentials, President LePen is in pole position.

Economic Pundits must be bewildered that their Wisdom itself stands exposed - can't recall such abysmal faith in Pundits infallibility.
The learned Professor must understand that Democracy requires Economics to realign - not the other way around.
Perhaps the Internet Age has produced an Enlightenment - that challenges Pundits potency in unprecedented ways.
Decades in power, decades in grooming their heirs - The Pundits need reformation perhaps.

The Bourbons cannot carry on with their biscuits - after The Bastille is stormed, once again in Paris in three weeks.
It is time for The Pundits to change their chants - Modi, Brexit, Trump, LePen represent a Global Game of Faith.
Erstwhile Pundits need to understand - and harness the new Faith.

Trump is an economic illiterate compared to Sachs? Really? More Fake News actually. Trump’s grasp of trade economics is a lot more substantive than Sachs, even if his ideas are not sufficiently PC for the PS set. A few points should make this clear.

First, trade economics is definitely not a first year topic. Second or third year? Perhaps. Graduate level? Definitely by that point.

However, the notion (from Sachs and others) that the saving rate (as in low) drives the trade deficit is an inversion of causality. At least in the case of the U.S., the trade deficit has driven the saving rate. Let me offer a key example.

From 2000 to the crash of 2007/8 the U.S. trade deficit exploded to the highest level in U.S. (and indeed world history). At its peak, the trade deficit exceeded 6% of GDP. Of course, this caused immense pain (lost jobs, lost wages, depression conditions, etc.) in much of the USA. How did the administration (Bush 43) respond? By blowing up the housing bubble which crashed the saving rate. How did the housing bubble slash the saving rate? First, MEW (Mortgage Equity Withdrawal) peaked at 9% of Disposable Personal Income (over $800 billion per year at the peak). Second, the housing bubble brought a surge in capital investment in commercial and residential construction.

Of course, the housing bubble was mandatory for the Bush (43) administration given the fanatical fixation of the Bush administration on “free trade” (really outsourcing, offshoring, domestic economic destruction). Of course, the housing bubble ended in disaster. What should be clear is that Trade Deficit led inexorably to the crash of 2007/2008. To put this bluntly Bushinomics/Sachynomics brought economic ruin to the USA (and much of the world). Note that there is nothing uniquely American about any of this. Large trade deficits have led to major crashes all over the world.

There is a deeper point here. If they U.S. (hypothetically) took steps to raise the saving rate, the consequences would be dire. The U.S. economy would immediately crash. Note that both parties in the U.S. recognize this. The Republicans promote “lower taxes” and “infrastructure investments” to stimulate the economy. The Democrats promote “more spending” and “infrastructure investments” to stimulate the economy. In both cases, it’s just closet (from Bruce Bartlett) trade deficit driven Keynesianism.

Could the U.S. raise the saving rate and not crash? Sure it could. However, that would require a dramatic increase in exports and/or reduction in imports. Both require a large reduction in the value of the U.S. dollar and dramatically lower trade surpluses in other nations (Germany, China, etc.). Are these countries willing to give up their surpluses and accept a lower dollar? Not at this point.

The bottom line is easy. Sachs is economic illiterate compared to Trump. Sachs is PC. Trump is not. Sachs is still wrong. Just the facts, not the Fake News.

Peter
Re Junnosuke Inoue, I am not convinced you can call what is going on in the EU democracy. It very much seems to be democracy with a warp and runs counter to the current demand for decentralisation and devolvution

TR, You and Cato are right. The CA/trade deficit and economic growth are correlated in modern (post-1980 at least) economic history. From roughly 2000 to 2007 the U.S economy expanded substantially and the CA/trade deficit soared (too levels unheard of in U.S. and even world history). The expanding U.S. economy was driven by a bubble in real estate (commercial and residential) and on Wall Street. The bubble drover the U.S. economy upwards and massively inflated the CA/trade defict.

Guess what? Bubbles end. Bubbles burst. The post-2000 bubbles and triggered the worst crash since 1929. Have Cato and friends apologized for their role in promoting the bubble? Have they shown any remorse for the horrors they inflicted on the U.S. (and the world)? I think the best answer here might be to observe that blind arrogance is not the sole property of the left.

By contrast, Trump’s plan is much sounder and more practical. Rather than relying on bubbles that end in ruin, the U.S. should grow the economy by shrinking imports and expanding exports. Of course, Trump didn’t invent these ideas.

See “How America Can Create Jobs” by Andy Grove and “America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem--And We Need To Do It Now.” By Warren E. Buffett Carol J. Loomis.

The sustainable wealth of a nation is derived from the goods and services it actually produces, not from bubbles or foreign debt. President Trump understands this. Cato and Sachs do not.

A few facts and economic history should help here. Let’s consider Spain (a bigger country in Europe).

Spain’s CA deficit peaked in 2007 at 9.648 percent of GDP. In those 2007, the (primary) budget surplus (not deficit) was 3.093% of GDP. After 2007, the CA deficit fell while the (primary) budget deficit soared. By 2009, the CA deficit was down 4.281% of GDP. The (primary) budget deficit was up to 9.624% of GDP. In other words, the CA deficit and the budget deficit moved in exactly opposite directions.

After 2009, the numbers change again. In 2015, the CA surplus was 1.392% of GDP. The (primary) budget deficit was down to -2.38% of GDP. In other words, after 2009, the CA deficit and the budget deficit moved in tandem. Does that make Sachs “right”? Not exactly, in 2015 the unemployment rate in Spain was 22.075%.

This is what neoliberal economics is really all about. Utter ruin for ordinary people and an economic/political paradise for the cosmopolitan elite. Sachs is the Pol Pot version of neoliberalism.

Of course, if the U.S. took Sach’s economic advice, the results would be similar. Raising taxes (sufficiently) would switch the public sector (mostly the Federal government) from deficits to surpluses. The CA / trade deficit would (probably) fall dramatically. Unemployment would soar into double digits. The neoliberal version of utopia of course.

The bottom line is easy. Sachs is economic illiterate compared to Trump. Sachs is PC. Trump is not. Sachs is still wrong. Just the facts, not the Fake News.

Note, the 2016 CA/budget deficit numbers for Greece are actually the 2015 numbers.

A few facts and economic history should help here. Let’s start with Greece (a small country in Europe).

Greece’s CA deficit peaked in 2007 at 15.188 percent of GDP. In those 2007, the (primary) budget deficit was modest (2.21% of GDP). After 2007, the CA deficit fell while the (primary) budget deficit soared. By 2009, the CA deficit was down 12.345% of GDP. The (primary) budget deficit was up to 10.111% of GDP. In other words, the CA deficit and the budget deficit moved in exactly opposite directions.

After 2009, the numbers change again. In 2016, the CA deficit was just 0.046% of GDP. The (primary) budget was in surplus (0.728% of GDP). In other words, after 2009, the CA deficit and the budget deficit moved in tandem. Does that make Sachs “right”? Not exactly, in 2015 the unemployment rate in Greece was 25.034%.

This is what neoliberal economics is really all about. Utter ruin for ordinary people and an economic/political paradise for the cosmopolitan elite. Sachs is the Pol Pot version of neoliberalism.

Of course, if the U.S. took Sach’s economic advice, the results would be similar. Raising taxes (sufficiently) would switch the public sector (mostly the Federal government) from deficits to surpluses. The CA / trade deficit would (probably) fall dramatically. Unemployment would soar into double digits. The neoliberal version of utopia of course.

The bottom line is easy. Sachs is economic illiterate compared to Trump. Sachs is PC. Trump is not. Sachs is still wrong. Just the facts, not the Fake News.

SH, I appreciate that this is rather obscure. However, the sad life and death of Junnosuke Inoue provides a model for the fall of Europe. Junnosuke Inoue was a great liberal of the period (Japan in the 1920s-1930s). He favored democracy, rejected extreme nationalism, and opposed war. He also put Japan back on the gold standard, triggering a downturn that cost him his life and put Japan on the road to Pearl Harbor and Hiroshima.

People like Sachs are the Junnosuke Inoue's of our time. Even if they mean well (not always true), their policies will lead to utter and complete ruin.

'In a "normal" economic environment, Spain would massively devalue and recover. As a resident of the Euro Gulag this is not possible for Spain'

The normal in the EU is intrinsically a zombie state. Remedial surgery is not helpful when it is not a limb that needs amputating but the head. The zombie state clearly sought to hide economic problems by deliberately encouraging a housing bubble because this was a way of getting naive investors to seek debt and then dump that cash into the economy giving instant froth. Strip debt uptake out and the figures are grim. BTW I agree your comment that Dani R is the one who is noteworthy as he apparently swims against the Status quo flow

The problem with the zombie state is it is unable to respond to stimuli and simply wants to consume and perpetuate which is eerily reminiscent of the USSR

" this caused immense pain"
I think you are overstating the correlation between the trade deficit and economic growth
"The evidence is overwhelming – month after month, quarter after quarter, year after year – that the trade deficit and GDP rise and fall together. The largest annual decline in the trade deficit ever recorded was between 2008 and 2009, during the trough of the Great Recession. The largest annual increase in the trade deficit occurred between 1999 and 2000, when the economy grew by 4.7 percent – the strongest annual economic growth in the past 33 years.

When the economy grows, households, businesses, and government tend to spend more, and they spend more on both domestic and imported goods and services. When the economy contracts, there is less spending on both domestic and imported goods and services. For the past 42 straight years, the United States has registered trade deficits. In 40 or those 42 years, annual changes in the value of imports and the value of GDP moved in the same direction."
https://www.cato.org/blog/peter-navarro-harvard-phd-economist-trade-warrior

Sachs has a Ph.D. in Economics from Harvard, and Trump has a Bachelor's degree in Economics from Penn. In addition, Sachs focuses on international economics whereas Trump has been a real estate developer, reality show host, and failed casino developer. And you expect anyone to believe that "Trump's grasp of trade economics is a lot more substantive than Sachs?"

In a "normal" economic environment, Spain would massively devalue and recover. As a resident of the Euro Gulag this is not possible for Spain. Spain might recover. As of Q4 2016, Spain's GDP was still below the Q2 2008 peak.

Sensible people with some knowledge of economics know this. Of course, the truth (the Euro Gulag) isn't PC and not acceptable to PS. It's still the truth. There is an extensive literature linking the Euro Gulag and the Gold Standard. Grim reading to be sure. Still true.

As an aside I would comment that the housing bubble has different impact depending on the country. For example - In the US due to Gt Depression legislation a householder can walk in and throw the keys over the counter and walkaway without penalty, (and some did in order to clear negative equity when they could actual service the mortgage). At the other end of the spectrum in Spain there is no escape from the mortgage other than death. Bankruptcy does not negate the mortgage and in some cases mortgages have been countersigned by the next generation as well as guarantor. There are difference on the consequential outcomes. The likelihood of generational problems and therefore impacts on the economy differ country to country and the impact on bank write-offs also varies. In the UK mortgages are bundled with insurance policies to protect the bank not the mortgage holder so at one time or another there has been sly enthusiasm for repo in order to invoke the insurance policy and payout to the bank. For UK banks to try and blame a UK housing bubble for their eye watering ledgers is just ingenious. To return to Spain, consequential problems due to housing in Spain (which is a major EU member) are not likely to clear anytime soon because they are embedded

If the trade deficit is the US' fault, give a person an extra dollar and the trade deficit should get worse by 20 cents (import spending 20%).
If the trade deficit is due to foreign countries stealing our profits (Kalecki's profit equation) and the US compensates to replace those profits, expect net non-financial debt to rise dollar-for-dollar with the trade deficit.
The data clearly shows they manipulate and steal US profits and the US compensates.
This author doesn't understand Kalecki's profit equation or that business are created in search of profits. Who is illiterate?

Rick
'...debt to rise dollar-for-dollar with the trade deficit...'
I thought the whole issue of debt rising was related in part to trade imbalance issues and the stockpiling of cash elsewhere by definition. That from that the central issue becomes the release by one means or other of stockpiled cash. Whilst a dangerous game the question then becomes by what means that cash stockpiling is ameliorated or positively dis-encouraged. It appears inevitable there has to be an element of strategic deterrence which is what Trumps position currently seems to be. The question that develops from that is damage limitation. As debt growth is problematic and Joe Pubic is not going to welcome the reality of lifestyle drop and will then storm the ballot box any POTUS has no alternative other that to engage in conflict, there is no other way forward and so by definition risk is involved